VAT: Be compliant and cash flow positive

If you are a VAT-registered business, in order to ensure you are compliant with VAT rules, you need to add your VAT number on your profile account when making purchases online, for example such as buying software, licenses, and digital services. Follow the procedure below to stay compliant with HMRC and ensure you can claim VAT paid in these instances.

Make sure you register as a business versus than personally when purchasing online

If you register for a monthly subscription with, say, LinkedIn, Spotify, Youtube, etc, make sure you register as a business rather than with your personal details.

If you do register personally, you will be viewed as a consumer versus a business and be charged VAT. If you are identified as a business, this is seen as a B2B transaction, and the transaction will be handled as a reverse charge transaction for VAT purposes, with no VAT money collected from you.

Remember, you cannot make a claim for VAT if the invoice is addressed to you personally rather than your business.

If you make a purchase personally, but it is then put through the business as a valid business expense, then the business can reclaim it but it is important to change your profile details to the correct business details.

These digital service expenses do add up in a business, and if software fees increase, for example, as they often do year-on-year, then the risk to the business and cash flow increases.

For previous invoices, you can ask suppliers to reissue invoices to properly identify you as a business. If you are a sole trader and VAT registered, you can ask suppliers to identify you as a your name and ‘trading as….[company name]’.